Utah Securities Commission
Meeting Minutes
September 25th, 2014
Division of Securities Staff Present
Keith Woodwell, Division Director
Maria Skedros, Commission Secretary
Dave Hermansen, Enforcement Director
Benjamin Johnson, Licensing & Registration Director
Dee Johnson, Investor Education Director
Ann Skaggs, Securities Analyst
Charles Lyons, Securities Analyst
Adam Sweet, Lead Securities Investigator
Matt Edwards, Lead Securities Investigator
Chris Hardy, Securities Investigator
Sally Stewart, Administrative Assistant
Other State of Utah Employees:
Jennie Jonsson, Administrative Law Judge, Department of Commerce
Paul Amann, Assistant Attorney General
Karl Perry, Assistant Attorney General
Dan Lau, Assistant Attorney General
Commissioners Present
Erik Christiansen, Parsons Behle & Latimer
Tim Bangerter, Landmark Wealth Advisors
Brent Baker, Clyde, Snow & Sessions
Commissioners Absent
Gary Cornia, Brigham Young University
David Russon, Investment Management Consultants
Public Present:
Bradley Bertoch, Wayne Brown Institute
David P. Williams, attorney for Brian Kitts
Chad Reid, Respondent
Chris Crossett, witness
Eric Litster, witness
Greg Webber, witness
Scott Geertsen, witness
Corey Brownson, witness
T.J. Black, witness
Brooks Rashid, witness
Minutes: At 9:05 am the meeting was called to order by Commissioner Erik Christiansen. Commissioner Tim Bangerter made the motion to approve the minutes from the August 11th, 2014 Commission meeting and Commissioner Brent Baker seconded the motion and the motion was approved unanimously.
Director’s Report: Director Woodwell reported that Sally Stewart has joined the Division; she has been with the Department of Commerce for the last nine years. Director Woodwell also gave an update on proposed legislation regarding expungement of administrative actions that was proposed last year but did not pass. Representative Green and Representative Hutchings have been working on new legislation that addresses Administrative Expungements. Director Woodwell promised to keep the Commission informed on this legislation as the new Legislative Session approaches. Future Meetings Scheduled: November 20th, 2014, January 22nd, 2015, and March 26th, 2015.
Proposed Rule Amendments: Benjamin Johnson reported on the new NASAA filing system referred to as the Electronic Filing Depository (EFD). EFD will come online in beta testing sometime during November 2014. NASAA has provided proposed rules for States to review that support this type of electronic filing. Mr. Johnson explained that the Division had modified the NASAA model rule because the Division is unsure of the official date that the EFD will go online and be fully functional. The Division’s proposed rule includes a notice provision whereby the Division will provide 30 days public notice, and only after that period, 506 filings will be accepted exclusively through the EFD system.
Commissioner Brent Baker made the motion to approve the proposed rule amendment and Commissioner Tim Bangerter seconded the motion. The motion was passed unanimously.
Investor Education Report: Dee Johnson reported that the Division had 5 investor education events in August, and in September there will be 7. As part of an AARP event in August, one of Director Woodwell’s investment fraud presentations was filmed by White Rabbit Productions and will be available on YouTube and distributed by AARP and the Division for investor education purposes.
Education and Training Fund Report: Benjamin Johnson reported that spending is following historical patterns. In the public investor education column, Karen McMullin has asked for additional funding for upcoming publishing needs and events.
Commissioner Brent Baker made the motion to approve the proposed budget and Commissioner Tim Bangerter seconded the motion. The motion was passed unanimously.
Grant Request: Wayne Brown Institute: Brad Bertoch from the Wayne Brown Institute addressed the Commission and reviewed how the funds in the past have been used and how the current funds requested will be spent. The grant request is for $20,000.
Commissioner Tim Bangerter made the motion to approve the proposed budget and Commissioner Brent Baker seconded the motion. The motion was passed unanimously.
Consideration and Approval of Proposed Orders:
Russell Clark Mitchell: Recommended Order on Motion for Default: SD-14-0026 Dave Hermansen reported that a notice of agency action and order to show cause was filed in July of 2014. The Respondent was ordered to file a response with the Division, and to this date, the Respondent has failed to appear or respond. Therefore, the Division is seeking a default order against the Respondent. The Respondent is ordered to cease and desist from any further violations of the Act, ordered to pay a fine of $25,000 to the Division and be permanently barred from licensure in the securities industry in Utah.
Commissioner Brent Baker made the motion to approve the proposed Order and Commissioner Tim Bangerter seconded the motion. The motion was passed unanimously.
JP Morgan Securities: Stipulation and Consent Order: SD-14-0044 Ken Barton reported that The North American Securities Administrators Association Working Group and JP Morgan Securities, LLC (“JPMS”) entered into a settlement in connection with a multi-state task force investigation. JPMS was found to have failed to monitor the licensing status of persons accepting client orders and failed to follow JPMS written procedures, which constitutes a failure to supervise under the Utah Uniform Securities Act. JPMS Sales Assistants accepted orders when not properly licensed, which constitutes a violation for employing unlicensed agents under the Act. JPMS, on occasion, failed to record the person accepting orders, which constitutes a Books and Records violation under the Act. JPMS completed several remedial actions, including making system upgrades to tighten controls to their order entry systems, completing compliance policy improvements and conducting compliance training. JPMS has agreed to a monetary settlement. Utah’s share of the NASAA global settlement is $51,000.00.
Commissioner Tim Bangerter made the motion to approve the proposed Order and Commissioner Brent Baker seconded the motion. The motion was passed unanimously.
Hearing: Brain A. Kitts: SD-07-0051: Mr. Kitts failed to appear before the Commission but was represented by David Williams. Mr. Kitts had previously been ordered to appear personally or be held in default. Mr. Williams reported that Mr. Kitts is in Canada and will not participate in this proceeding. Therefore, the Division requested that a default order be entered against the Respondent. Mr. Kitts was ordered to cease and desist from any further violations of the Act and pay a fine of $109,375 to the Division. The Commission agreed to have Administrative Law Judge Jennie Jonsson prepare the order.
Hearing: Chad Bennett Reid SD-13-0030: Mr. Reid appeared and represented himself before the Commission. An evidentiary hearing was conducted by the Commission. Following the presentation of evidence, the Commission concuded tha the evidence supported the Division’s claims and the Commission instructed Administrative Law Judge Jennie Jonsson to prepare the Findings of Fact and Conclusions of Law and Order.
Commissioner Brent Baker made the motion to approve the proposed Order and Commissioner Tim Bangerter seconded the motion. The motion was passed unanimously.
Commissioner Tim Bangerter made the motion to adjourn the meeting.
Commissioner Brent Baker seconded the motion and the meeting was adjourned at 11:41 am.